As difficult as it is to comply with California’s daily overtime rules, it is easy to forget the one form of flexibility provided to employers — make-up time. This provision allows employers to avoid paying overtime when employees want to take off an equivalent amount of time during the same work week. This Friday’s Five covers what make-up time is, and the general requirements for it to apply under the California Labor Code.

What is make-up time?

Make-time time can offer employees and employers some flexibility in scheduling.  For example, it offers employees the ability to take time off work without having to use their paid time off (PTO), sick leave, or vacation time.

For example, take an employee who is scheduled to work from 8 a.m. to 5 p.m. five days a week, leaves work 1 hour early on Wednesday in order to pick up his child from school. On Thursday, the employee asks if he can work until 6 p.m. to make up the missed time on Wednesday.  If the employer agrees to this, the employee can work the 9 hours on Wednesday, and the employer would not be required to pay overtime for this hour of work. 

California Labor Code section 513 set forth the requirements of how and when make-up time can be used.  Make-up time is different than comp time, which we will cover in a different article soon.

There are, however, a few requirements that must be met to ensure that the employer is not required to pay overtime for the makeup time:

Requirement #1: An employee may work no more than 11 hours on another workday, an not more than 40 hours in the workweek to make up for the time off;

Requirement #2: The time missed must be made up within the same workweek;

Requirement #3: The employee needs to provide a signed written request to the employer for each occasion that they want to makeup time (and if employers permit makeup time, they should have a carefully drafted policy on makeup time and a system to document employee requests); and

Requirement #4: Employers cannot solicit or encourage employees to request makeup time, but employers may inform employees of this option.

Remember, time and a half overtime is due for (1) time over eight hours in one day or (2) over 40 hours in one week or (3) the first eight hours worked on the seventh consecutive day worked in a single workweek; and double time is due for (1) time over 12 hours in one day and (2) hours worked beyond eight on the seventh consecutive day in a single workweek.

The California Supreme Court’s decision in Naranjo v. Spectrum Security Services, Inc. represents a significant win for employers across the state, providing much-needed clarity on wage statement requirements and the categorization of premium pay for missed breaks. While this ruling alleviates some of the complexities surrounding California’s stringent labor laws, it also serves as a reminder that vigilance in wage and hour issues remains crucial. In this article, we’ll break down the top five takeaways from the court’s decision, highlighting how it benefits employers and emphasizing the ongoing need for meticulous compliance to safeguard against potential penalties and legal challenges:

1. Good Faith Defense for Wage Statements.

The California Supreme Court ruled that if an employer reasonably and in good faith believed it was providing complete and accurate wage statements in compliance with section 226 of the Labor Code, then it has not knowingly and intentionally failed to comply with wage statement requirements. This establishes a good faith defense for employers against penalties for purported wage statement violations.

2. Wage Statement Requirements.

The ruling reaffirms the obligations under Labor Code section 226 that employers must provide employees with detailed wage statements that list hours worked, wages earned, and other pertinent information. Failure to comply, if not based on a good faith belief, can still lead to statutory penalties.

3. Treatment of Missed-Break Premium Pay as Wages.

The Court previously held that employers are required to treat premium pay for missed meal and rest breaks as wages. Under California law, employees are entitled to certain rest and meal breaks during their workday. If an employer fails to provide these mandated breaks, the employee is typically owed one hour of pay at their regular rate for each day that the break was not provided—this is known as “premium pay.”

The California Supreme Court confirmed that this premium pay for missed breaks should be treated as wages, rather than penalties. This distinction has significant implications for reporting on wage statements, calculating timing payment of wages and final wages, and penalties. 

4. Penalties for Non-Compliance.

The Supreme Court confirmed that penalties for not including required information on wage statements can be avoided if the employer can demonstrate a reasonable and good faith belief in their compliance, even if that belief is later shown to be mistaken.  If an employer knowingly and intentionally fails to provide a wage statement with all required information, the employee may recover statutory penalties. Specifically, for initial violations, an employee can recover $50, and for each subsequent violation, the penalty increases to $100 per employee, up to a maximum of $4,000. In addition to these penalties, the employee can also recover costs and reasonable attorney’s fees.

5. Distinction in Handling Missed-Break Premium Pay.

The Supreme Court clarified that missed-break premium pay must be treated as wages, not penalties. This interpretation is crucial because it means that premiums paid for missed meal and rest breaks must be included in the final wage payments upon an employee’s termination and reported on wage statements. If these payments were to be considered penalties, the payments would not be subject to the same stringent reporting and payment requirements as wages. This distinction impacts how employers should handle missed-break premiums both during employment and in final paychecks, emphasizing the need for accurate payroll practices and compliance with wage statement requirements to avoid additional liabilities.

As reported last week, the California Attorney General’s office announced that the new state law banning “junk fees” will extend to surcharges at restaurants, marking a significant shift in billing practices in the food industry. Today, the Attorney General finally released the FAQs which were promised last week. Under this interpretation of the Attorney General of Senate Bill 478, which does not mention restaurants or restaurant surcharges, California restaurants will be prohibited from adding service fees to bills starting July 1, 2024—a practice that had been adopted by many eateries as a means to support higher wages in lieu of traditional tipping. 

The FAQs state the following regarding restaurants:

What about tips or gratuities left voluntarily by customers?

This law does not affect tips or gratuities left by customers, since they are not mandatory. These voluntary payments to workers are governed by other laws, including Labor Code section 350. For more information see this FAQ from the California Labor Commissioner.

What about mandatory fees charged by restaurants?

If a restaurant charges a mandatory fee, it must be included in the displayed price. Under the law, a restaurant cannot charge an additional surcharge on top of the price listed. Gratuity payments that are not voluntary must be included in the list price.

Does DOJ expect that its initial enforcement of this law will focus on existing fees that are paid directly and entirely by a restaurant to its workers, such as an automatic gratuity?

No. There are many factors that we consider when making enforcement decisions, but we do not expect that our initial enforcement efforts will focus on existing fees that are paid directly and entirely by a restaurant to its workers, such as an automatic gratuity. However, businesses may be liable in private actions.

The California Restaurant Association came out against the FAQs published by the Attorney General’s Office, calling the FAQs a “prime example of legislating through a press release.”  The CRA is considering options to potentially block implementation of the law as interpreted by the Attorney General’s Office.  We will continue to report on any developments regarding SB 478.

In the case Jones v. Riot Hospitality Group, the plaintiff, Alyssa Jones sued her former employer, a bar, Riot Hospitality Group, and its owner individually alleging discrimination and other employment tort claims.  Plaintiff was found to have intentionally deleted relevant text messages with co-workers from 2017 and 2018, and coordinated with her witnesses to delete additional messages from 2019 and 2020. These actions were taken with the intent to deprive the defendant, Riot Hospitality Group, of information critical to the litigation. The district court ruled that the deletions could not be remedied through further discovery and consequently dismissed the case under Federal Rule Civil Procedure 37(e)(2), which addresses the loss of electronically stored information (ESI) due to a party’s failure to take reasonable steps to preserve it when litigation is anticipated. The court’s decision was based on Jones’ intent to obstruct the litigation, a key factor under the Rule, and determined that lesser sanctions would not be sufficient.

1. Missing text messages.

    During discovery, Riot obtained text messages between Jones, her friends, and co-workers between October 2015 and October 2018.  However, Riot found instances where plaintiff abruptly stopped texting with people she had been communicating with on almost a daily basis.  Riot subpoenaed Jones’ third-party imaging vendor, and the vendor’s response showed that text messages between Jones and co-workers had been deleted from Jones’ phone.  In addition, during depositions of two co-workers, they both admitted that they had exchanged text messages with Jones about the case since October 2018.  After Jones failed to comply with a court order producing those messages, the court ordered that a third-party forensic search specialist review the phones of Jones and the three prospective witnesses.  Jones and two of the witnesses produced their phones to the search specialist.  The third witness claimed to have damaged her phone and that it was lost (of course).  The court excluded this third witness’ testimony. 

    2. Expert determination that plaintiff and witnesses coordinated deletion of text messages.

    After finally receiving all of the text messages extracted from Jones’ and the witnesses’ phones, the forensic search expert submitted a report to the court that after reviewing the messages between the phones, that “an orchestrated effort to delete and/or hide evidence subject to the Court’s order has occurred.”  In 2022, the district trial court dismissed the case with prejudice, relying on the holding that plaintiff and her witness deletion of the text messages was intended to deprive Riot from using this evidence in the litigation.

    3. Dismissal under Federal Rule 37(e)(2)

    Rule 37(e) applies when electronically stored information (ESI) “that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery.”  If the court finds the loss harmful to the other party, it “may order measures no greater than necessary to cure the prejudice.” Fed. R. Civ. P. 37(e)(1). However, if the court finds that a party “acted with the intent to deprive another party of the information’s use in the litigation,” dismissal is authorized. Fed. R. Civ. P. 37(e)(2).

    Rule 37(e) provides a framework for addressing ESI issues in litigation. Employers can use this rule strategically by emphasizing their efforts to preserve relevant information and by challenging claims where the opposing party fails to do the same.

    4. The court found plaintiff intentionally destroyed text messages.

    The district court found substantial circumstantial evidence indicating that Jones intentionally destroyed a significant number of text messages and collaborated with others in doing so, which was upheld by the Ninth Circuit Court of Appeals. Jones failed to provide a satisfactory explanation for why messages to other employees at the bar were selectively deleted during 2017 and 2018. Additionally, a screenshot of a message sent to Jones, which was missing from her phone in its original form, demonstrated that she deleted at least one message relevant to the case. Furthermore, after being ordered to submit their phones for forensic imaging, Jones and a witness acquired new phones and did not produce the original ones for examination, thereby preventing the recovery of the deleted messages. The court concluded that Jones selectively deleted specific messages while preserving others from the same period, a finding supported by the evidence presented.

    5. Electronic stored information is critical in employment law cases.

    ESI has become critically important in employment law cases due to its comprehensive and revealing nature. In today’s digital age, a plaintiff’s ESI such as emails, text messages, digital documents, and even social media posts can shed light on plaintiff’s allegations in litigation.  Just as Jones did in this case, co-workers will likely text about their work environment, and these real time communications are key in discovering the facts of the case. It provides a time-stamped, verifiable record of communications and transactions that can prove intent, show patterns of behavior, or contradict statements made during litigation. Given its potential impact, the ability to accurately collect and analyze ESI is essential for establishing the facts and in employment disputes.

    The California Attorney General’s office yesterday announced that the new state law banning “junk fees” will extend to surcharges at restaurants, marking a significant shift in billing practices in the food industry. Under Senate Bill 478, effective starting July 1, 2024, California restaurants will be prohibited from adding service fees to bills—a practice that had been adopted by many eateries as a means to support higher wages in lieu of traditional tipping.

    This legislation comes amid rising concerns over transparency in pricing. The intent, as outlined by a Department of Justice spokesperson, is to ensure that consumers understand the complete cost of services upfront, with all charges included in the listed prices. This approach aims to eliminate hidden costs that inflate the final bill unexpectedly, a tactic commonly seen in sectors like entertainment and hospitality.

    However, this change is not without controversy and concern.

    This legislative change also opens the door to potential legal challenges. Businesses that fail to comply could face lawsuits with damages starting at $1,000, mirroring the wave of litigation seen under laws like the Americans with Disabilities Act. The fear of such outcomes adds another layer of urgency for restaurants to adapt their pricing models swiftly.

    Interestingly, the law exempts food delivery platforms like DoorDash from including service fees in the prices shown to consumers.

    As the attorney general’s office prepares to release an FAQ to clarify further details, stakeholders from all sides are on edge. While the goal of SB478 is to promote transparency and fairness, its broad implications suggest a turbulent period ahead for California’s restaurant scene. The coming months will be crucial in determining whether this legislative change can indeed balance consumer protection with the economic viability of the restaurant industry.

    For more information about service charges, tips, and tip pooling, see our prior article here.

    In today’s regulatory environment, conducting background checks in compliance with both federal and state laws is not only a necessity but also a complex legal challenge for employers. This article delves into the intricacies of four major laws that California employers must consider: the federal Fair Credit Reporting Act (FCRA), the California Investigative Consumer Reporting Agencies Act (ICRAA), the California Consumer Credit Reporting Agencies Act (CCRAA), and the California Labor Code. Each of these statutes outlines stringent guidelines for how background checks should be conducted, what employers must disclose, and the rights of employees throughout the process.

     1. Background checks must comply with the federal Fair Credit Reporting Act and the California Investigative Consumer Reporting Agencies Act. 

    Three applicable laws apply to California employers who perform background checks: the federal Fair Credit Reporting Act (FCRA), California Investigative Consumer Reporting Agencies Act (ICRAA), and the California Consumer Credit Reporting Agencies Act (CCRAA).  These laws are complex and are very detailed. 

    The laws generally require employers to:

    1. Obtain written authorization from the employee to conduct the background check
    2. Provide notice about background checks
    3. If taking an adverse employment action based on the information obtained through the background check, additional notices must be provided to the employees.

    For example, before the employer takes an adverse employment action, they must provide the employee with a notice that includes a copy of the consumer report being relied upon in the decision.  The employer must also provide a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act”.

    After the adverse employment action has been taken, the employer must provide certain information to the employee, such as:

    • The employment decision was taken because of the information in the report
    • The name, address, and phone number of the company that compiled the report
    • The company that compiled the report did not make the hiring decision, and
    • That the employee has the right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days.

    As set forth below, California employers can only perform credit checks for a very limited set of positions, and cannot perform a credit check on every employee.  In addition, the CCRAA requires additional disclosures to the employee if a credit check is performed.  See Cal. Civ. Code section 1785.20.5.

    2. Even if conducting a background check in-house, if an employer searches public records, these records must be disclosed to the employee within seven days.

    Generally, if the employer conducts the background checks itself, the FCRA, ICRAA and CCRAA do not apply.  One exception to this rule is that the ICRAA requires that if the employer searches “public records” the employer must produce a copy of the public record to the employee within seven days of receiving the information (this applies to records received either in written or oral form).  “Public records” are defined as “records documenting an arrest, indictment, conviction, civil judicial action, tax lien, or outstanding judgment.”

    3. Employers are required to provide notice to the third-party conducting the background check under

    Employers using outside credit reporting agencies must provide a certification to the reporting agency that the employer obtained the permission from the applicant/employee to obtain a background report, complied with the FCRA, and does not discriminate against the applicant or employee or otherwise use the information for an illegal purpose.

    Here are some resources for employers to learn more about their requirements under federal law:

    The Fair Credit Reporting Act & social media: What businesses should know (FTC)

    Background Checks: What Employers Need to Know (FTC)

    The interaction between the federal FCRA, and California’s own requirements under the ICRAA and CCRAA adds another level of complexity to the analysis.  It is important for employers to review these laws closely to ensure compliance, and it is highly recommended to have experienced legal counsel review the practices.

    4. California law prohibits employers from asking about criminal convictions prior to making a conditional employment offer. 

    In addition, since January 1, 2018 California employers cannot ask applicants to disclose information about criminal convictions.  The law added as Section 12952 to the Government Code and applies to employers with 5 or more employees.  Once an offer of employment has been made, employers can conduct criminal history background checks, but only when the conviction history has a “direct and adverse relationship with the specific duties of the job,” and requires certain disclosures to the applicant if employment is denied based on the background check.  In addition, local jurisdictions, such as Los Angeles and San Francisco have implemented their own prohibitions on criminal history checks, and employers must also comply with these local requirements as well. 

    5. Credit Checks: California employers can only conduct credit checks (which are different from background checks) only for a limited type of employee in certain positions. 

    Since 2012, California employers can only perform credit checks on employees who meet very specific categories.  Employers must ensure that the employee qualifies under one of the categories set out in Labor Code section 1024.5 in order to conduct a credit check. 

    The landscape of employment background checks in California is governed by a detailed and complex set of federal and state laws. It is imperative for employers to understand and adhere to the specific requirements of the FCRA, ICRAA, CCRAA, the Labor Code, and local laws to ensure legal compliance and protect their businesses from potential liabilities. Given the complexities involved, consulting with experienced legal counsel to review background check practices is highly recommended.

    California is the first state to propose restrictions on an employer’s ability to communicate with employees after work hours.  AB 2751, currently making its way through the California legislature, would give employees the “right to disconnect.”  While this right has been adopted in other countries, such as France, Spain, and Mexico, no state in the U.S. has a specific law addressing this issue.  As discussed below, the proposed law would dramatically change the dynamic on overtime work for both exempt and nonexempt employees in California.  Here are five key issues California employers need to know about the proposed bill:

    1. The proposed bill: AB 2751.

    AB 2751, if passed in its current form, would require employers to develop a policy that provides employees with the right to disconnect “from communications from the employer during nonworking hours.”  Nonworking hours would need to be established in writing between the employer and employee.  The employee could file a complaint for a pattern of violation, which is defined as three or more documented instances of being contacted outside of work hours.  Violations of the law would be a misdemeanor and of at least $100.  Unionized workers covered by a collective bargaining agreement are not provided protection under this law. 

    2. Exceptions under the proposed law.

    The proposed bill does permit employers to contact employees outside of working hours for emergencies or for scheduling purposes impacting changes within 24 hours.  “Emergency” is defined as situations that threaten an employee, customer, or the public, a situation that disrupts or shuts down operations, or causes physical or environmental damage. 

    3. California state and local laws already protect workers.

    California law already provides for numerous protections to employees who are required to work overtime.  Some examples are:

    • Overtime: California law requires employers to pay overtime.  As recognized by the California Supreme Court, this is an unwaivable right by employees.  Labor Code section 510 provides that nonexempt employees must be paid one and one-half their wages for hours worked in excess of eight per day and 40 per week and twice their wages for work in excess of 12 hours a day or eight hours on the seventh day of work.
    • On-call time: Under California law, an employee’s on-call or standby time may require compensation.

    4. The proposed bill would apparently apply to exempt employees and does not account for different industries.

    The proposed bill does not exclude exempt employees from the law.  Therefore, even exempt employees, such as doctors, lawyers, engineers, officers of a corporation, would all still be covered under the law. 

    The proposed bill does not address industries that do not have fixed work hours.  One could only imagine the impact such a bill would have on the trucking industry, catering and event companies, and health care providers.  The bill is silent on industries that do not have established work hours because of the practical considerations for their workplaces and how the law would apply to these industries. 

    5. Not only does the bill create a right to disconnect – it also creates a right to refuse to work overtime altogether.

    In addition to providing employees the right to disconnect, the bill also apparently provides employees with a legal right to refuse to work overtime past their normal work schedule.  Currently under California law, employers may require employees to work overtime, as long as the employer complies with the overtime requirements and other wage and hour requirements (some mentioned above).  However, under the proposed law, it shifts the decision to the employee on whether they want to work overtime.  The employee would be permitted to leave work at the designated “nonworking hour” as agreed with the employer, and refuse to communicate with the employer at that point.  The bill would limit employers’ ability to have employees work overtime only in emergency situations, as defined by the law. 

    Under California’s pay data reporting obligations, employers with 100 or more employees must prepare and file reports by May 8, 2024.  Employers are required to gather and report employee race and ethnicity data, among other items.  However, many employers do not have records detailing employee’s race and ethnicity, so how can this information be gathered?  California’s Civil Rights Department (CRD) explains in their FAQs, how employers may collect this information.

    Understand the Reporting Categories

    The initial step for employers is to understand the seven race/ethnicity categories that must be reported on. These categories are:

    1. Hispanic/Latino
    2. Non-Hispanic/Latino White
    3. Non-Hispanic/Latino Black or African American
    4. Non-Hispanic/Latino Native Hawaiian or Other Pacific Islander
    5. Non-Hispanic/Latino Asian
    6. Non-Hispanic/Latino American Indian or Alaskan Native
    7. Non-Hispanic/Latino Two or More Races

    These classifications are adopted from the federal EEO-1 survey to maintain consistency with federal reporting and facilitate the process for employers.  In the past, employers could report “unknown,” but this is not an option for employers reporting in 2024. 

    Employee Self-Identification

    The CRD explains that the preferred method for collecting this data is employee self-identification. Employers should provide employees the option to voluntarily disclose their race or ethnicity. The CRD provides the following sample statement that employers can use when approaching employees:

    “[Employer name] is subject to certain governmental recordkeeping and reporting requirements for the administration of civil rights laws and regulations. In order to comply with these laws, [employer name] invites employees to voluntarily self-identify their race or ethnicity. Submission of this information is voluntary and refusal to provide it will not subject you to any adverse treatment. The information obtained will be kept confidential and may only be used in accordance with the provisions of applicable laws, executive orders, and regulations, including those that require the information to be summarized and reported to the government for civil rights enforcement. When reported, data will not identify any specific individual.”

    Address Non-Disclosure

    If an employee chooses not to self-identify, employers must still classify the employee under one of the specified race/ethnicity categories. The CRD explains that employers should attempt to gather the employee’s race/ethnicity based on the following (in this order):

    • by using current employment records,
    • other reliable records or information, and
    • as a last resort, observer perception.

    Use of Observer Perception

    When observer perception is used, it is important to acknowledge the potential for inaccuracies. Employers are encouraged to document the use of observer perception in the clarifying remarks field of their reports. An example statement is: “The race/ethnicity of [number] employees in this employee grouping is being reported based on observer perception.”  However, employers are not required to provide this statement in the clarifying remarks. 

    By following these guidelines, employers can effectively comply with reporting requirements while respecting their employees’ privacy and promoting an inclusive workplace culture. Remember, the ultimate goal of collecting this data is to foster an environment of fairness and equality in employment practices.

    Employers of 100 or more employees to report to the California Civil Rights Department (“CRD”) pay and hours-worked data by establishment, pay band, job category, sex, race, and ethnicity.  The pay data reports are due by May 10, 2024.  This requirement applies to employers even if they are based outside of California, but have one employee (or even one employee hired through a labor contractor such as a staffing agency) working in California or assigned to an establishment in California.   

    By requiring large employers to report pay data annually the Legislature sought to encourage these employers to self-assess pay disparities along gendered, racial, and ethnic lines in their workforce and to promote voluntary compliance with equal pay and anti-discrimination laws.

    In addition, Senate Bill 973 authorized CRD to enforce the Equal Pay Act (Labor Code section 1197.5), which prohibits unjustified pay disparities. Moreover, the Fair Employment and Housing Act (Gov. Code § 12940 et seq.), already enforced by CRD, prohibits pay discrimination. The CRD states that the Employers’ pay data reports allow CRD to identify wage patterns and allow for effective enforcement of equal pay or anti-discrimination laws, when appropriate.

    In 2022, the Legislature passed Senate Bill 1162 to enhance the California pay data reporting law in many aspects.  For example, private employers with 100 or more workers hired through labor contractors in the prior calendar year to report pay data for these workers and requiring more information about the employer’s workforce, such as median and mean wage information.  In addition, starting in the reports due on May 8, 2024, employers must also report whether employees worked remotely during the “Snapshot Period.” 

    1. Pay data reports are due on May 8, 2024.

    California requires employers to submit the pay data reports by the second Wednesday of May each year (which is May 8 in 2024).

    The reports require employers to gather and report about median and mean hourly rate for each combination of establishment worked at, race, ethnicity, and sex within each job category, pay band, hours worked in 2023, as well as if the employee worked remotely.

    Employers with 100 or more employees hired through contractors are required to submit a separate report for these employees.

    2. Employers who must report.

    Under Government Code section 12999(a)(1), a private employer that has 100 or more employees (anywhere as long as it has one employee in California) are required to submit a pay data report to the Civil Rights Division (CRD).  An employee is “an individual on an employer’s payroll, including a part-time individual, and for whom the employer is required to withhold federal social security taxes from that individual’s wages.” Gov. Code § 12999(k)(1).

    3. Determining if an employer has 100 or more employees.

    An employer has the requisite number of employees if the employer either employed 100 or more employees in the Snapshot Period or regularly employed 100 or more employees during the Reporting Year. “Regularly employed 100 or more employees during the Reporting Year” means employed 100 or more individuals on a regular basis during the Reporting Year. “Regular basis” refers to the nature of a business that is recurring, rather than constant. The CDR provides the following example: “In an industry that typically has a three-month season during a calendar year, an employer that employed 100 or more employees during that season regularly employed the requisite number of employees and would be required to file a pay data report with CRD.” 

    The Snapshot Period is a single pay period between October 1 and December 31 of the Reporting Year.  For the reports due in 2024, the Reporting Year is 2023.  Employers may choose the single pay period between October 1 and December 31. The Snapshot period is used to identify the employees to be reported on in the pay data report. The employee does not have to be paid during the Snapshot period – it only matters whether the employee was employed during the Snapshot Period.

    Employees located inside and outside of California are counted when determining whether an employer has 100 or more employees.

    An employer with no employees in California during the Reporting Year is not required to file a pay data report.

    Part-time employees, including those who work partial days and fewer than each day of the work week, are counted the same as full-time employees. 

    Employees on paid for unpaid leave, including the California Family Rights Act (CFRA) leave, pregnancy leave, disciplinary suspension, or any other employer-approved leave of absence, must be counted.

    Employers must include all employees assigned to California establishments and/or working within California.

    4. Must include remote workers outside of California, but “assigned” to an establishment in California.

    Starting for Reporting Year 2023, employers must report the number of employees in an employee group who worked remotely. The CDR explains, that a “remote worker refers to employees (payroll employees or labor contractor employees) who are entirely remote, teleworking, or home-based, and have no expectation to regularly report in person to a physical establishment to perform their work duties. Employees in hybrid roles or (partial) teleworking arrangements expected to regularly appear in person to perform work at a particular establishment for any portion of time during the Snapshot Period would not be considered remote workers for pay data reporting purposes.”

    Remote workers outside of California “assigned” to an establishment in California must be included in the employee pay data report.  The CDR provides the following example: If an employer has a single establishment in Riverside, California with 500 employees working from that location, the employer would submit a report covering all 500 employees. If 25 of these employees were working remotely (in California or beyond), the employer’s report would still cover all 500 employees.

    5. When a Labor Contractor Employee Report must be filed.

    Companies are required to file a separate Labor Contractor Employee Report if it had 100 or more employees hired through labor contractors in the prior calendar year anywhere with at least one worker based in California. 

    “Labor contractor” – is defined as “an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.”  The CDR explains that a client employer’s “usual course of business” means the regular and customary work of the client employer. “Regular and customary work” means work that is performed on a regular or routine basis that is either part of the client employer’s customary business or necessary for its preservation or maintenance. “Regular and customary work” does not include isolated or one-time tasks.  The CDR provides the following example: Catering staff contracted to serve food at a trucking company’s tenth anniversary party would not be performing work within the client employer’s usual course of business, assuming catering a party is an isolated occurrence for the company.

    The CDR explains that the pay data report only applies to employees hired through labor contractors, not 1099 workers. 

    The Civil Rights Department California Pay Data Reporting website is here.

    The CRD’s FAQs about the Pay Data Report is here.

    In Cornell v. Berkeley Tennis Club, Plaintiff Ketryn Cornell alleged that her obesity should qualify as a disability under California law. Ketryn Cornell began working part-time for the Berkeley Tennis Club as a lifeguard and pool manager in 1997, while attending college at UC Berkeley. She was employed as a night manager and continued to work at the Club after graduating from college in 2001.  In 2011, she took on additional duties and began working as a night manager, day manager, and tennis court washer. She received positive reviews, merit bonuses, and raises throughout this period.

    The Club employed a new general manager in 2012.  The new manager implemented a uniform policy.  While mandating the staff to wear uniform shirts, the largest sized ordered by the club did not fit Cornell.  Cornell was obese, at five feet, five inches tall, she weighed over 350 pounds.  Cornell explained to the general manager that she needed a bigger size, and he reported that he would work on providing an appropriate uniform.  However, it is unclear if he attempted to find shirts Cornell could fit.  Taking upon herself, Cornell ordered shirts from a specialty shop at her own expense and had them embroidered with the Club logo.

    Cornell filed a lawsuit in May 2014, asserting causes of action for various Labor Code violations and the eight causes of action that were at issue on the appeal, which included disability discrimination/failure to accommodate under the Fair Employment and Housing Act (FEHA), wrongful discharge in violation of public policy based on the disability discrimination, disability harassment under the FEHA, and retaliation under the FEHA.  Here are five takeaways for California employers arising from this disability discrimination decision:

    1. Obesity can qualify as a physical disability under the Fair Employment and Housing Act.

    Under FEHA, it is unlawful to discriminate against an employee on the basis of “physical disability.” (Gov. Code, § 12940, subd. (a).)  In addition to making it illegal to discriminate on the basis of disability, the FEHA makes it unlawful “to fail to make reasonable accommodation for the known physical . . . disability of an . . . employee.” (§ 12940, subd. (m)(1).)  Finally, the FEHA prohibits an employer from harassing an employee “because of . . . physical disability.” (§ 12940, subd. (j)(1).)

    The Club moved for summary adjudication of the discrimination/failure to accommodate claim and the harassment claim on the basis that Cornell’s obesity is not a physical disability under FEHA. The Club also argued that even if Cornell has a condition protected by the FEHA, she did not require an accommodation and was not terminated for a discriminatory reason, and the Club’s actions were not severe or pervasive enough to constitute harassment.

    Cornell argued that her obesity qualified as an actual physical disability because it is a “physiological disease, disorder, condition, cosmetic disfigurement, or anatomical loss that does both of the following: [¶] (A) Affects one or more of the following body systems: neurological, immunological, musculoskeletal, special sense organs, respiratory, including speech organs, cardiovascular, reproductive, digestive, genitourinary, hemic and lymphatic, skin, and endocrine. [¶] (B) Limits a major life activity.” (Government Code § 12926, subd. (m)(1).)

    In Cassista v. Community Foods, Inc. (1993) 5 Cal.4th 1050 (Cassista), the California Supreme Court held “that weight may qualify as a protected `handicap’ or `disability’ within the meaning of the FEHA if medical evidence demonstrates that it results from a physiological condition affecting one or more of the basic bodily systems and limits a major life activity.” (Id. at p. 1052.) Interpreting the same statutory language as currently found in section 12926, subdivision (m)(1)(A), and relying on federal antidiscrimination law for guidance, the Court concluded that “an individual who asserts a violation of the FEHA on the basis of his or her weight must adduce evidence of a physiological, systemic basis for the condition.” (Cassista, at pp. 1063-1065.)

    The court set forth the definition of “physiological”:

    Rather, the pertinent question is whether a genetic cause qualifies as a “physiological cause.” “Physiological” means “relating to the functioning of living organisms.” (Oxford English Dict. Online (3d ed. Mar. 2006) [as of Dec. 21, 2017 [physiological].) This term encompasses genetics, and the Club does not argue otherwise. We therefore reject the implication that Cornell cannot establish her claim by proving that her obesity has a genetic cause.

    The Court found that Cornell’s testimony that other doctors had determined her obesity was caused by genetics, and the fact that those doctors were not deposed, was enough evidence for Cornell to overcome the employer’s motion for summary judgment and proceed to trial on this claim.

    2. Even if others were involved in decision to terminate, plaintiff can still maintain a discrimination cause of action if person alleged to have discriminated against plaintiff was involved in the termination decision.

    The employer in this case argued that the general manager who was alleged to have discriminated against Cornell was not the only person involved in the decision to terminate her, but that other supervisors were involved, and therefore the decision could not have been discriminatory.  The court rejected this argument in holding:

    “[S]howing that a significant participant in an employment decision exhibited discriminatory animus is enough to raise an inference that the employment decision itself was discriminatory, even absent evidence that others in the process harbored such animus.” (DeJung v. Superior Court (2008) 169 Cal.App.4th 533, 551.) There is evidence that [General Manager] Headley made several comments suggesting he held a discriminatory animus toward Cornell. Although the extent to which he participated with Gurganus and Miller in the decision to fire Cornell is unclear, there is plenty of evidence that he participated in some way….

    3. While sporadic comments are not enough to create a hostile work environment, courts may look to the context of all of the actions taken against the employee in determining if a hostile work environment existed.

    The Club argued that even if Cornell is otherwise entitled to protection under the FEHA, summary adjudication of her disability harassment claim was proper because she was not subject to sufficiently severe or pervasive harassment. The appellate court disagreed:

    Here, Cornell was able to present enough evidence to at least continue to trial with her harassment cause of action because of the statements made by the General Manager in regards to obtaining a uniform shirt that fit Cornell, the General Manager’s comments about Cornell having weight-loss surgery, and his comments to kitchen staff not to give Cornell extra food because “she doesn’t need it.”  The Court recognized that these types of comments on four occasions do not create a hostile work environment, “Four comments over several months does not establish a pattern of routine harassment creating a hostile work environment, particularly given that the comments were not extreme.”  (“Actionable harassment consists of more than “annoying or `merely offensive’ comments in the workplace,” and it cannot be “occasional, isolated, sporadic, or trivial; rather, the employee must show a concerted pattern of harassment of a repeated, routine, or a generalized nature.” (Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264, 283.)”)

    However, the Court found that the employer’s conduct must be viewed in context of the General Manager’s other actions, “including his ordering of shirts that were significantly too small for her and reporting to the Personnel Committee that she was resisting the uniform policy by not wearing appropriate shirts, as well paying her less than another employee and denying her extra hours and internal job openings.”  This evidence was enough to prevent the employer from dismissing Cornell’s harassment claims prior to trial.

    4. Requests for reasonable accommodations are protected activities under the law.

    In 2015 the Legislature amended section 12940 to add subdivision (m)(2), which made it unlawful for an employer to “retaliate or otherwise discriminate against a person for requesting accommodation under this subdivision, regardless of whether the request was granted.” (Stats. 2015, ch. 122, § 2.)

    5. Primary takeaway for employers: treat all employees with respect.

    While certain conduct that is rude, unfair, and unethical may not raise to the level of being unlawful discrimination, harassment, or retaliation under the law, this type of conduct will inevitably lead to higher litigation costs and employee turnover.  I’ve written about how most companies cannot afford to have managers like Steve Jobs, and this case is another example.  While the employer had arguments that the manager’s actions in this case were not illegal under the law, even if the employer prevails at trial in this case, the costs associated with the litigation are substantial.  Unprofessional comments by co-workers, managers and supervisors in the workplace should be stopped by employers, as they may not be illegal, it could create litigation from employees who felt that they were not treated fairly.